S&P: Bank loans seen to grow 11-14%

S&P Global Ratings on Wednesday said it expects bank loans in the country to grow by 11 to 14 percent in the next two years on the back of robust consumer loans.

The outlook range is close to the 12 percent credit growth recorded in December 2024 by the Bangko Sentral ng Pilipinas.

S&P Global Ratings Director for Financial Institutional Ratings Nikita Anand projects consumer loans to rise by 18 percent, sustaining the overall credit growth.

"Banks will continue to pursue higher risk-adjusted returns by expanding their consumer loan books," she said in a webinar on Wednesday.

However, Anand forecasts growth in corporate loans to remain steady as banks expressed plans to boost consumer loans and achieve financial inclusion in underserved sectors.

S&P Global Ratings Head of Macroeconomic Modeling and Credit Market Research Vince Conti said the higher demand for loans will be driven by low inflation rates, a resilient peso, and easing monetary policy.

S&P Global Ratings Director for Sovereign Ratings YeeFam Phua forecasts the local average inflation to remain manageable at around 3 percent until 2028 as Asian neighbors flood the Philippine market with cheap goods as a way to avoid Trump's tariffs.

"Current account deficits have widened of late due to higher imports from rising domestic demand," he said.

"But we expect the deficits to moderate due to subdued energy imports," Phua continued.

Given the Philippines' relatively low inflation, Conti shared that Filipinos' consumption of goods and services generally has grown by 2 percent quarter-on-quarter.

Meanwhile, economists observed weaker demand from foreign markets as businesses postpone expansion activities due to inflationary effects of US President Donald Trump's tariffs.

To encourage faster Philippine economic growth through domestic consumption, Conti projects the Central Bank to ease its policy rate cumulatively by 175 basis points this year until 2026.

So far, the Central Bank loosened its policy by 75 basis points from 5.75 percent in February to 5.25 percent in June this year.

Steady NPL ratio

Anand expects banks' non-performing loans (NPL) ratios to remain unchanged this year and the next at less than 6 percent.

She said the possibly low interest and inflation rates should help bank clients save funds to repay their loans.

Given its policy cuts in recent years, the Central Bank reported the share of NPLs of secured loans for automobiles started shrinking in 2022 from over 8 percent to around 4 percent last year. Meanwhile, NPLs for housing loans fell from around 7 percent to 6 percent.  

However, Anand said unsecured loans through credit cards posted higher NPLs, increasing from 4 percent to nearly 5 percent. Meanwhile, NPLs of personal loans grew from 5 percent to nearly 6 percent.

"The sustained increase of unsecured loans warrants some monitoring given the relatively lower income in the country," she cautioned.

However, Anand said Filipino households still acquired much lower debt compared to other Asian countries as the Philippines' household debt
as percentage of gross domestic product stood at less than 20 percent compared to Singapore's 50 percent, China's 60 percent, and Malaysia's 80 percent.

"Mitigating factors include improving employment in the Philippines," she said.